As the economy turns down, fraud rises.

"Fraud is both perennial and cyclical," commented Bruce Bush. CPA. of KPMG, Dallas, Texas, in a presentation on financial statement fraud at the AlCPA Forensic Accounting Conference on Fraud and Litigation Services in September 2008. Bush's observation is supported by the findings of recent surveys cited in the following article. The survey findings also may explain why, as a recent AlCPA survey concluded demand for forensic CPAs is accelerating.

The current economic downturn has led to an upturn in workplace theft--especially in large organizations--according to the Institute for Corporate Productivity (i4cp). The Institute, a network of corporations focused on improving workforce productivity, conducted a study in November 2008. The study found that 27% of respondents in large companies (10,000 or more employees) said workplace crime has increased during the current economic crisis, and 1 5% of all responding companies, regardless of company size, reported the same.

Among companies that believe the current economic situation has led to an increase in theft, 24% of all responding companies and 31% of large companies have noticed an increase in the theft of company-owned items such as office supplies, products they produce, electronic equipment, and food items.

All responding companies also saw an increase in employee-related monetary theft, such as expense report padding, disappearance of cash, and other financial crimes; 18% reported increased monetary theft as did 22% of large companies.

A growing problem cited by 24% of all companies is "time theft." Such theft includes employees using company property for personal use and surfing of non-company-related Web sites. However, only 13% of large organizations consider such time theft to he a problem.

Not all theft involved employees. A quarter of all responding companies, and 30% of large companies, reported a rise in white-collar crimes committed by outsiders, citing identify theft and breaches of secure employee data. In addition, 28% of all companies and 32% of large organizations reported an increase in physical external criminal activity (such as job site robberies and break-ins) since the downturn began.

Growth in fraud volume and value

In the latest Kroll Global Fraud Report, the current challenging economic climate, including the credit crunch, is also assigned the blame for a 22% increase in loss to fraud. Companies lost an average of $8.2 million to fraud in the past 3 years...

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